Conventional wisdom suggests that lockup options are granted by self-interested target managers to discourage competition and hand-select an acquirer, thus harming target shareholder wealth. Evidence from 2,067 deals announced during 1988–1995 suggests that lockup options inhibit competition, but on average, deals with lockup options have higher target announcement and overall returns and lower bidder announcement returns, even after controlling for shareholder anticipation and other factors. An examination of 100 merger proxies suggests lockup options are no more prevalent in privately negotiated, preemptive deals, and average target returns are higher when such deals include a lockup option. The overall evidence is more consistent with managers using lockup options to enhance bargaining power than with lockup options harming shareholder wealth.

Abstract We examine the 2007 stock market bubble in China. Using multiple measures of bubble intensity for each stock, we find significantly smaller bubbles in stocks for which there is greater analyst coverage. We further show that the abating effect of analyst coverage on bubble intensity is weaker when there is greater disagreement among analysts. This suggests that, in line with resale option theories of bubbles, one channel through which analyst coverage may mitigate bubbles is by coordinating investors’ beliefs and thus reducing its dispersion. Stock turnover provides further evidence consistent with this particular information mechanism.

Existing literature argues that disparity in investment opportunities within diversified firms can erode firm value. We investigate the diversity cost hypothesis of spinoffs by using post-spinoff data to (1) reconstruct the diversified firm after the spinoff and assess the aggregate improvement in value and (2) relate any value improvements to changes in diversity. We find that improvements in aggregate value depend significantly on changes in both a direct measure of diversity and measures based on industry proxies. We conclude that diversification discounts at least partially reflect a value loss due to the diversified nature of the firm itself, rather than selection bias or measurement error.

We examine underwriting fees for repeat issuers of new securities to determine the relation between loyalty to an underwriting bank and the fees charged. For a sample of offers over the 1975–2001 period, we find that loyalty is associated with lower fees for common stock offers, consistent with valuable relationship capital being built through loyalty. For debt offers, however, we find the opposite pattern, consistent with relationship capital not being as valuable. For both offer types, firms that graduate to higher-quality banks face lower fees. Firms that are more likely to be switching banks to improve analyst coverage face higher fees for common stock offers, but not for debt offers.

Abstract We compare reactions in the prices and trading patterns of common stocks and closed-end funds (CEFs), securities with substantially different investor clienteles, to the Sept. 11, 2001 terrorist attacks. When the market reopened 6 days later, retail investors sold and there were sharp price declines, even in assets with net institutional buying. In the subsequent 2 weeks, price reversals were substantially security specific and thus not simply due to improved systematic sentiment. Consistent with microstructure theory, comparisons between CEFs and common stocks show the speed of these reversals depended significantly on the relative quality and availability of information about fundamental values.